The Paycheck Investor's Personal Finance
Understand Your Spending Habits
Our spending habits set the stage for our financial situation. The spending habits we have reflect themselves in all parts of our financial lives, from interest debts to household needs, impulse spending, and even the bills for the services we receive.
To understand how our spending habits affect our finances, we must first understand how our funds flow through our lives. We can sum this up in three basic areas: Needs, Wants, and Savings.
Understanding Your Creditworthiness
and Interest Debts
How we maintain our credit and debts can make a large difference in the types of debts we acquire. Lenders base their decisions to lend to us, and what the cost will be for lending to us, on our creditworthiness. Lenders determine our creditworthiness by trying to get the best picture of what our financial situation has been, is, and will be in the future. The two main areas that help them determine this is are our credit report/score and our debt-to-income ratio (DTI).
Understanding Your Financial Situation
Although our spending habits and interest debts may not seem like they affect our financial situation very much, they play a larger role than we think.
As each month passes, our financial situation falls into one of three categories: positive, balanced, or negative.
Basics on Personal Accounting and Budgeting
Arguably, the two most boring words in the English language are ‘accounting’ and ‘budgeting’. However, we tend to view the two with far more apprehension than we need to, and we overlook the importance they have in maintaining healthy personal finances.
The Best-Bang-For-Your-Buck Method
When it comes to bills, such as insurance, social bills, and interest debt, we need to be sure that we are getting the best value for our money. The best-bang-for-your-buck method is meant to keep our accounts at their best value.
Our goals with the financial workout are to rebalance our spending by dissolving some of our bad spending habits and keeping our spending in check.
The best way to create or dissolve any habit is by repetition. Now, you might think that a financial workout's goal is based on a dollar amount, but instead we're aiming for habit building.
Budgeting Your Financial Account Funds
Now that we have more control over our spending and debts, it is time to add a no-exception clause. Saving is a habit, and the goal is to budget 10% of our income to fund our savings.
Although 10% sounds like a lot, on average, we spend that in our grey spending area or in overpaying for our debts and bills. Once we have cleared up these areas, 10% is very feasible.
Sally's 90-Day Personal Finance Challenge
“90 days to buff you up financially, that is!"
When we want to make or break any habit (including our financial habits), most data indicate that we must take 45–65 actions to that end within a time span of 1–3 months. That is what this challenge aims for.
Did you know the average Chinese citizen saves one third of their income.
While the average American citizen spends 10% over their income...